India's telecoms regulator must guard against overly aggressive price-cutting in the nation's fast-growing telephone industry, a key policy maker said on Thursday.
"The regulator has to be reasonably vigilant against predatory tariffs," Rakesh Mohan, deputy governor of the Reserve Bank of India, told a World Bank conference in Bangalore. He earlier headed a government group on infrastructure.
Firms affiliated to HongKong's Hutchison group, India's powerful Reliance conglomerate and aggressive start-up Bharti Televentures Ltd, 16 per cent owned by Singapore Telecom, are among the key competitors.
India currently has 13 million cellular subscribers in a nation of one billion people. Its telephone penetration is 5.4 per cent, far below the global average of 15 per cent.
The number of connections is nearly doubling every year. Pricing plans frequently change with lower rates and incentives.
Mohan told reporters that the telecoms regulator needs to guard against bankruptcies in the industry, in the light of the financial difficulties faced by companies like US-based WorldCom Inc.
After initially auctioning telephone licences for fixed line services, the government switched to a policy of revenue sharing with free entry for firms and also raised the number of players in GSM technology-based mobile phone service zones.
The government has also allowed fixed line firms to offer limited mobility using the CDMA technology, complicating the competition between land line and mobile phone service firms.
